Food Court Follies—A WLF Legal Pulse Series

Several of our recent commentaries (here and here) have extolled the virtues of national uniformity for the regulation of interstate commerce. Those posts focused on litigation involving federally regulated prescription drugs and devices. But state consumer-protection litigation poses an even greater threat to regulatory uniformity.

Federal preemption—the constitutional doctrine that state-law litigation targets regularly cite as a defense—has generally been an ineffective argument against consumer-protection suits, especially those alleging misleading or false labeling of food and other packaged goods. A January 3, 2018 federal trial court ruling, Organic Consumers Association v. Hain Celestial Group, Inc., is a welcome exception to that trend. It’s also notable for how clearly the court explained implied preemption and the broader principle of uniformity underlying the defense.

The Organic Consumers Association (OCA) sued Hain Celestial in the District of Columbia Superior Court for a violation of the District’s consumer-protection law. OCA claimed that under the federal Organic Food Production Act (OFPA), the company could not label its “Earth’s Best” infant formula as organic because it contains certain synthetic ingredients. Hain Celestial’s alleged non-compliance with the OFPA rendered the “organic” claim misleading under the D.C. consumer-protection statute. The defendant successfully removed the suit to the U.S. District Court for the District of Columbia.

The OFPA does not contain an express preemption clause, so the defendant argued that OCA’s suit stood as an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” In his analysis, Judge Trevor N. McFadden assessed Congress’s objectives in passing the OFPA, which he wrote “could not have been clearer”:

Establish national standards for marketing organically produced products;

Assure consumers that such products meet a consistent standard; and

Facilitate interstate commerce in organically produced food.

Past lawsuits alleging analogous claims under other state consumer-protection laws led to divergent results. One decision cited in Hain Celestial, from the Eighth Circuit, held that the lawsuit conflicted with the OFPA’s goals and was thus preempted. Another, from the Eastern District of New York, held that “state-level enforcement would enhance, rather than obstruct” the OFPA, thus rejecting the preemption defense.

Judge McFadden found the Eighth Circuit’s approach more persuasive, and held that OCA’s suit “stands as an obstacle to each of the three stated purposes of the OFPA.” Congress meant to develop a national organic standard not through private litigation, but through a certification process devised and overseen by the U.S. Department of Agriculture. An OCA victory would mean Hain Celestial could market its infant formula in 50 states as “organic” but could not in D.C. Even if OCA sued in every state and won each case, the court explained, uniformity was unlikely since “the relevant state statutes will vary.”

While private lawsuits could superficially assure consumers that the OFPA is being enforced, the court explained, they could not ensure a consistent organic standard. If OCA prevailed in Hain Celestial, “a savvy consumer would know that the Challenged Products are not considered ‘organic’ in Washington, D.C., but would wonder why they were labeled as ‘organic’ elsewhere.”

Finally, the court wrote that a successful OCA lawsuit would undermine interstate commerce, not facilitate it. Judge McFadden quoted the Eighth Circuit’s reasoning on this point, which explained that Congress passed the OFPA to end the “consumer confusion and troubled interested commerce” that prevailed in the marketplace for organic foods before 1990.

An increasing number of consumer-product labeling suits are being filed under D.C.’s Consumer Protection Procedures Act thanks in part to a recent amendment granting non-profit groups standing as plaintiffs. Hain Celestial will be a helpful precedent for those facing suits in D.C. involving laws such as the OFPA, under which there are well-established federal standards. It may be of less value in cases challenging the use of such terms as “natural” or alleging fraudulent slack-fill, where less clear federal standards exist.

That said, a contrary outcome in Hain Celestial, one that embraced the Eastern District of New York court’s rejection of implied preemption, would have lent significant credence to the concept of “parallel enforcement” that has emerged in state-law consumer-fraud litigation. Court, especially in California, have allowed class-action lawyers to essentially enforce laws such as the Federal Food, Drug & Cosmetic Act—which explicitly prohibits private rights of action—as long as the state-law claim would lead to the same result as a federal regulation.

Such parallel enforcement, as Judge McFadden explained, can be an obstacle to uniform standards because of the differences in each state’s consumer-protection law. Also, the federal regulation a plaintiff seeks to privately enforce could be subject to different interpretations, creating further conflicting standards even within a state.